Lord Bates: My Lords, I join other noble Lords in paying tribute to the noble Baroness, Lady Tyler, for how she introduced the debate and join in the wide praise that she received from across the House for how she conducted the committee. The remark of the noble Lord, Lord Kirkwood, that it was a highlight of the week and that it was sad when it ended stands in stark contrast to my recollection of sitting on some committees in your Lordships’ House. I, too, look forward to the next one the noble Baroness will chair.
I say at the outset that we take this report extremely seriously. It was well researched, there was some incredibly important evidence in it, and it was well presented. That was a very important element. It has been a very important part of the Government preparing their own strategy.
The noble Lord, Lord Tunnicliffe, was notable in using the curate’s egg argument about our response. Before I turn to some of the areas that he focused on, in which we have not done very well, for recollection, refreshment and the record let me just say what we have done. We have announced the financial inclusion policy forum; I shall come to more details on that later. We have the Minister for Financial Inclusion, Guy Opperman, who has been recognised for the work he has done. We announced changes in the Budget to universal credit totalling some £1.5 billion. We have introduced the Financial Guidance and Claims Bill, which my noble friend Lord Young took through this House with characteristic skill. He managed to ensure that, in the best traditions, it left in better shape than it arrived. It also left with the commitment to breathing space for debt, introduced at Third Reading. The Financial Conduct Authority has produced its Financial Lives Survey; financial inclusion is a key part of our digital strategy; and the FCA has taken robust action on rent-to-own schemes. We have introduced the rent recognition challenge, encouraging fintech firms to address the issue of credit histories for those  who rent properties, as opposed to those who have mortgages. These are in addition to basic bank accounts and payday lending caps, which I will come to later. It is a vast agenda to cover in the short time available to me.
The breadth of the challenges of financial inclusion and financial capability is significant. The noble Baroness, Lady Tyler, spoke about the elderly; my noble friend Lord Patten spoke about geographic exclusion. The noble Lord, Lord McKenzie, spoke about debt; the noble Lord, Lord Fellowes, spoke about rural bank networks. My noble friend Lord Holmes spoke about digital inclusion; the noble Lord, Lord Empey, spoke about gambling and addiction. The right reverend Prelate the Bishop of Birmingham spoke about the role of faith communities in responding to it. My noble friend Lord Northbrook spoke about mental health; the noble Baroness, Lady Lister, spoke about domestic violence and universal credit. The noble Viscount, Lord Brookeborough, spoke about the difference between capability and inclusion and the importance of education; my noble friend Lord Shinkwin spoke about cancer support. My noble friend Lady Altmann spoke about pensions and the noble Lord, Lord Kirkwood, mentioned insurance. The noble Lord, Lord Tunnicliffe, referred to general vulnerability. I will try to make as much progress as I can on that agenda in the time available and seek to address the specific points raised by noble Lords.
In their response to financial inclusion, Her Majesty’s Government use the World Bank’s definition, which is,
“financial inclusion means that individuals, regardless of their background or income, have access to useful and affordable financial services”.
To the contrary, financial exclusion means that individuals lack that access. When we consider this definition, it follows that the Government’s policy regarding financial inclusion must be focused on ensuring that there is an appropriate supply of useful and affordable financial services and products. The Government therefore work closely with the industry regulator, the Financial Conduct Authority, to ensure that appropriate action is taken when the market fails to supply such services and products.
Government policy on financial capability is distinct from the inclusivity agenda, as the noble Viscount, Lord Brookeborough, mentioned, and is focused on ensuring that appropriate information, guidance and advice is available so that members of the public are empowered to make decisions appropriate for them. This is a role that the new single financial guidance body is designed to address and I am pleased that the Financial Guidance and Claims Bill, which will put that new body in place, has progressed through this place and into the House of Commons.
The Government have aimed to boost inclusion and ensure the widest possible access to fee-free basic bank accounts. The nine largest personal current account providers are now legally required to offer these to customers who are unbanked or ineligible for a bank’s standard current account. The noble Lord, Lord Holmes, mentioned the importance of online savings. The Treasury publishes data on basic bank accounts annually to  show how the market is developing. Last year’s data showed that there are now over 4 million fee-free basic bank accounts.
Another extremely important pillar of financial inclusion is addressing affordable credit. The Government have been active in ensuring that a functioning consumer credit market and a well-run regulatory regime are maintained by transferring supervision of the consumer credit market to the Financial Conduct Authority and legislating to require it to introduce a cap on the cost of payday loans, a fact recognised by the right reverend Prelate the Bishop of Birmingham and the noble Baroness, Lady Tyler, in her introduction. It is worth pausing to remember that that cap has had an immediate effect. There were 4.2 million payday loans approved in the first six months of 2014. In the first six months of 2015, after the cap was introduced, that had reduced to 1.18 million. That means that 760,000 borrowers have been able to save some £150 million per year, money that has gone back into the pockets of the poorest in our society. A feedback statement published by the FCA in July has found the cap to be successful and it will consult on further interventions in spring 2018.
Finally, the Government are encouraging innovations in financial technology to promote financial inclusion. A recent example is Fintech for All, a nationwide competition launched in September 2017. Two winners were announced at an awards ceremony held on 15 November. The noble Lord, Lord Empey, is right about the incredible wealth of expertise that we have in the City of London, just a few miles from this place. That expertise in fintech is also found in other major financial centres around the UK, such as Edinburgh, Leeds, Newcastle, Manchester and Birmingham. The noble Baroness, Lady Tyler, referred to the technology involved in bank accounts and particularly whether, rather than reducing vulnerability, it might lead to further vulnerability and potential exclusion for the elderly, those in rural communities where broadband and internet access is not as great, and people with disabilities. We need to keep a focus on that area.
The noble Viscount, Lord Brookeborough, predicted all the answers which I might give on education. My heart sank as he ran through them all, because it was exactly what was in my speech—so I hesitate to reiterate it. However, I put on the record that the new national curriculum in England, taught from September 2014, made financial literacy statutory for the first time for 11 to16 year-olds. However, to improve financial education we need to look to other organisations beyond what is provided in the school curriculum. A wide group of organisations can have a role to play. Various community organisations and families have a responsibility in this area as well. The right reverend Prelate also referred to the excellent work of organisations such as Christians Against Poverty, with which I have had some contact, and the role that they play in education. If it is all about inclusion, it stands to reason that none of us is free from the responsibility to engage with this matter and ensure that people get the education they need. That is why the Government have ensured that financial education for children and young people remains a focus of the new single financial guidance body, with the aim of bringing together funders and providers of initiatives across the UK to maximize impact.
The Select Committee has made a number of recommendations on access to welfare, including the abolition of the seven-day waiting period at the start of universal credit. The noble Baroness, Lady Lister, and the noble Lords, Lord McKenzie and Lord Empey, all welcomed this as far as it went—I accept that—and acknowledged that it was a step in the direction for which they have diligently argued for some time. The comprehensive, wide-ranging package, worth £1.5 billion, will ensure that claimants of the benefit get more money sooner, while retaining the principle of which the noble Lord, Lord Empey, spoke in favour.
The noble Baroness, Lady Tyler, spoke about the importance of leadership. As regards our response to the committee’s proposal on the Financial Inclusion Policy Forum, this initiative was designed to drive better co-ordination and engagement across government and with the sector to address the problem of financial exclusion. The forum’s objective is to bring together Ministers in government departments with a remit to promote financial inclusion, regulators, especially the FCA, and key stakeholders working in their own capacity to address financial exclusion. It will be jointly chaired by the Economic Secretary and the Minister for Pensions and Financial Inclusion and support government leadership and collaboration with the sector, report on initiatives by both government and regulators, and monitor progress. I take the point made by the noble Lord, Lord Kirkwood, who wondered how that choreography might work. Across government there is a general feeling that interministerial groups work particularly well in getting not just Ministers but officials together to make sure that they work in a constructive way going forward. My noble friend Lord Patten said that it was not just central government that was key to this; he mentioned the importance of local government as actors in this regard.
We were pleased with the unanimous support that the financial forum initiative received. I would like to mention in particular the support of the independent Financial Inclusion Commission, which stated that the forum is,
“a further indication that the government is taking the issue of financial exclusion seriously”,
and that it has,
“a vital role to play in making this a country that works for everyone”.
That struck a chord with not only the noble Lord, Lord Kirkwood, but, I guess, in Downing Street as well. We welcome this endorsement and look forward to the forum being set up in the first quarter of 2018. Further details about its membership and the date of its first meeting will be published soon.
I turn to some of the specific questions raised in the time I have available. The noble Baroness, Lady Tyler, and my noble friends Lord Holmes and Lord Shinkwin asked about the adjustment practices for disabled consumers. The FCA’s handbook requires firms to identify particularly vulnerable customers and to deal with them appropriately. In addition, like all service providers, banks and building societies are bound under the Equality Act 2010 to make reasonable adjustments, where necessary, to the way in which they deliver their services.
The noble Baroness, Lady Tyler, asked when the forum would meet, and whether the minutes would be published. The forum will meet every six months. It will bring together regulators and Ministers in government departments with a remit to discuss and promote financial inclusion. More details on the membership of the forum will follow early in the new year.  The agenda will be published and we will make  decisions on what happens with the minutes and make announcements on that in due course.
The noble Lord, Lord Empey, asked about Recommendation 21, which was about payment of housing benefit direct to landlords. We have listened to the concerns and will look to make it easier to set up and manage payments to landlords under universal credit. New guidance will be issued to staff to ensure that claimants in the private rented sector who have managed payments to landlords for their legacy housing benefit are offered this option when they join universal credit.
My noble friends Lord Shinkwin and Lord Holmes referred to the duty of care, as did my noble friend Lady Altmann. The Government recognise that there are very different views on the merits of introducing a duty of care for financial service providers and, as with any policy, we want to ensure that these are carefully considered and taken into account. The Government believe that the Financial Conduct Authority, as the UK’s independent conduct regulator for the financial services industry, is best placed to evaluate the merits of a duty of care for financial service providers. In this context we welcome the Financial Conduct Authority’s commitment to publish a discussion paper on the subject.
On access to banking, which was raised by my noble friends Lord Fellowes and Lord Patten, decisions on opening and closing branches and agencies are taken by the management team of each bank on a commercial basis and government does not interfere in these decisions. However, earlier this year the UK’s bank and building societies and the Post Office reached a new agreement which means that 99% of personal customers and 95% of business customers can do their day-to-day banking in post offices—be they sub-post offices or Crown post offices. At the Budget, the Economic Secretary to the Treasury also wrote to the Post Office and, through UK Finance, the banking industry, to ask them to raise wider awareness of these Post Office banking services.
The noble Lord, Lord Empey, referred to credit unions. I note his suggestion that the Government be supportive of increasing the level of long-term investment capital into credit unions. As set out in the Government’s response, long-term investment capital is important for all businesses, including credit unions, to help  them to maximise their potential. However, as credit unions are in principle self-capitalising institutions, the Government do not intend to lend directly to credit unions. The Government welcome private sector involvement in this area: for example, Lloyds Banking Group has a scheme that offers funding to help credit unions to improve their capital position.
The right reverend Prelate the Bishop of Birmingham wanted us to recognise the important contribution that charitable organisations make in tackling exclusion, and I am happy to do that. I can give one example, of LifeSavers, which works with local credit unions to help savings clubs in schools. The initiative, developed by the most reverend Primate the Archbishop of Canterbury and Young Enterprise to start savings discussions in primary schools—which I am sure the noble Viscount, Lord Brookeborough, will welcome—introduces the benefits of savings at a very early age. The Government have contributed £600,000 to this initiative.
As regards the timetable for the Financial Conduct Authority’s publication of its recommendations under the high-cost credit review, the FCA published a feedback statement in July 2017 which showed that the cap on payday loans has been successful. Consumers now pay less. In respect of the high-cost credit market, it identified specific concerns in rent to own, home-collected credit and catalogue credit, and identified issues in arranged and unarranged overdrafts. Having investigated the issues, the FCA will consult on any necessary intervention in spring 2018.
I am conscious that I am out of time and that there are many other issues. With the permission of your Lordships, I will review the official record of the debate and, if I have failed to respond on any matters, I shall write accordingly. However, I hope that the noble Baroness, Lady Tyler, might recognise that, while we have not gone all the way to the destination which she and her committee set out, we have taken some important first steps along that road to financial inclusion for everyone.